South Korean Won: Export surge supports BoK stance – Commerzbank

Commerzbank reports South Korea’s exports for the first 20 days of September jumped 78.3% year-on-year, extending nine months of double-digit growth and led by a 259% surge in semiconductor exports. The strong data underpins the Bank of Korea’s (BoK) confidence in growth, with the central bank expected to keep its policy rate at 3.0% while maintaining a hawkish bias at the 22 October meeting.

Record exports and steady policy rate

"South Korea's exports in the first 20 days of September surged 78.3% yoy vs 56.0% in August, marking a record high and extending double-digit growth to a ninth consecutive month."

"Overall, the strong early export data validates the Bank of Korea’s (BoK) positive assessment of the nation's economic growth. In the August meeting minutes released last week, the Monetary Policy Committee was seen as particularly confident that the economy could withstand further monetary tightening to stem growing inflationary pressures."

"However, recent KRW stability should lessen the near-term need for further rate hikes. Therefore, BoK is expected to maintain its hawkish bias while keeping the policy rate unchanged at 3.0% at its 22 October meeting, allowing policymakers more time to assess the lagged effects of past tightening on economic activity."

"In FX, USD/KRW fell 1.1% to 1,371 yesterday, the first decline in six sessions. The move was likely driven by lower global crude oil prices and exporter dollar selling ahead of the Chuseok holiday on 25 September. Separately, the BoK tested 24-hour KRW settlement with four local banks participating."

"This marks a key step in KRW market liberalisation efforts aimed at improving access for foreign investors. Greater accessibility remains a key hurdle to South Korea's reclassification to developed market status, given that MSCI previously identifying restrictions in the KRW market as a key constraint."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)